(a) Exemptions of Housing Projects from Taxation. In accordance with the authority vested in the City Commission pursuant to subparagraph 7 of Section 15a of Public Act 346 of 1966, as amended, the tax exemption established in subsection (1) of Section 15a of such Act 346 shall not apply to any housing projects within the City limits which might otherwise be entitled to tax exemption by virtue of such Section 15a(1) of such Act. However, this chapter shall not apply to housing projects designed for and used specifically and exclusively by low income individuals, or families and elderly persons as defined by such Act 346, which projects are financed by a mortgage loan from the Michigan State Housing Development Authority and funded pursuant to Section 236 of the National Housing Act or which are funded by a Federally insured mortgage by the Federal Housing Administration pursuant to Section 8 of the National Housing Act. No exemption, however, shall be effective with respect to any such project under Section 15a(1)(a) until the amount of the service charge or other sum to be paid in lieu of taxes for such project has been established by ordinance duly adopted by the City Commission.
(b) Workforce Housing PILOT.
(1) Title. This Ordinance shall be known and cited as the “The City of Battle Creek Workforce Housing PILOT Ordinance.”
(2) Preamble. It is a proper public purpose for the City of Battle Creek to encourage the development or rehabilitation of workforce housing for persons and families whose household income is not greater than 120% of area median income by exempting such housing from all ad valorem property taxes imposed by any taxing jurisdiction and providing for payment of an annual service charge for public services in lieu of all such taxes. A PILOT, or service charge payment in lieu of taxes, is an effective means of incentivizing the construction of workforce housing. A stable and predictable service charge paid in lieu of all ad valorem property taxes for a fixed period is essential to the determination of the economic feasibility of workforce housing projects developed or rehabilitated in reliance on such tax exemption. The City of Battle Creek is authorized by subdivision (3)(b) of section 15a of Public Act 346 of 1966, as amended, MCL 125.1415a, and specifically under this ordinance, to establish, or change by any amount it chooses, the service charge to be paid in lieu of all ad valorem taxes in accordance with section 15a with respect to new or rehabilitated workforce housing, but not an amount that exceeds the taxes that would be paid but for this authorization or the other limitations imposed by that section. Because workforce housing for individuals and families whose household income is not greater than 120% of area median income is a public necessity, and because the City will be benefited and improved by such housing, encouraging the same through an ad valorem property tax exemption is a valid public purpose.
(3) Definitions.
A. “Additional Amount” means an amount equal to the difference between the following:
1. the millage rate levied for operating purposes by the County multiplied by the current Taxable Value of a workforce housing project for which a PILOT Resolution has been adopted, and
2. The amount of the annual service charge paid in lieu of ad valorem property taxes by the housing project under subsection (4)C. hereof that is distributed to the County pursuant to MCL 125.1415a(5).
B. “Annual Shelter Rent” means the total collections during an agreed annual period from or paid on behalf of the occupants of a housing project representing rent or occupancy charges, exclusive of charges for gas, electricity, heat, or other utilities furnished to the occupants and paid for by the housing project.
C. “Sponsor” means any person or entity applying for a workforce housing exemption under this Ordinance, and includes any person or entity who subsequently owns the housing project.
D. “Authority” means the Michigan State Housing Development Authority.
E. “Restrictive Covenant” means a recorded agreement between Sponsor and the City running with the land that restricts the use of the housing project to workforce housing, as defined in this Ordinance, for a period not to exceed 15 years, or such greater or lesser period of time as may be authorized by state law and as may be required by the PILOT Resolution.
F. “County” means the County of Calhoun.
G. “PILOT Resolution” means a project-specific resolution adopted by the City Commission that approves a housing project for exemption under this Ordinance.
H. “Taxable Value” means taxable value as calculated under section 27a of the general property tax act, 1893 PA 206, MCL 211.27a.
I. “Workforce housing” means rental units or other housing options that are reasonably affordable to, and occupied by, a household whose total household income is not greater than 120% of the area median income published by the United States Department of Housing and Urban Development.
(4) Authorization and Establishment of Workforce Housing Exemption.
A. The class of housing projects to which the tax exemption shall apply and for which a service charge may be paid in lieu of all ad valorem property taxes are housing projects being developed or rehabilitated for workforce housing.
B. Subject to the recording of a Restrictive Covenant, workforce housing and the property on which such housing is or will be located shall be exempt from all ad valorem property taxes as of December 31 of the year in which construction or rehabilitation commences. Construction must start within one year of the date of the Authority’s notification of exemption or such longer period of time as may be provided by the PILOT Resolution.
C. The City of Battle Creek will accept payment of an annual service charge in lieu of all ad valorem property taxes for public services from the owner of a housing project for which the City has received a certified notification of exemption from the Authority in accordance with the following:
1. Subject to subsections (b)(4)D., E. and F. hereof, for a new construction project, an amount that is the greater of the tax on the property on which the project is located for the tax year proceeding the date on which the construction is commenced or 10% of the Annual Shelter Rent obtained from the project.
2. Subject to subsections (b)(4)D., E. and F. hereof, for a rehabilitation project, an amount that is the lesser of the tax on the property on which the project is located for the tax year proceeding the date on which rehabilitation is commenced or 10% of the Annual Shelter Rent obtained from the project.
3. The service charge paid in lieu of taxes shall not exceed the amount in ad valorem taxes that the Sponsor would have otherwise paid if the workforce housing project were not tax exempt.
D. Notwithstanding the provisions of MCL 125.1415a(3)(b) and 125.1415a(7) to the contrary, upon the adoption of a PILOT Resolution and receipt of a certified notification of exemption from the Authority, a contract shall be deemed effected between the City of Battle Creek and the Sponsor, to provide a tax exemption and accept service charge payments in lieu of taxes as previously described by this section.
E. Notwithstanding subsection (b)(4)C. hereof, the service charge paid each year in lieu of taxes for that part of a workforce housing project that is tax exempt under this Ordinance but not used for workforce housing must be equal to the full amount of the taxes that would be paid on that portion of the project as if the project were not tax exempt. The owner of the project shall allocate the benefits of any tax exemption granted pursuant to this Ordinance exclusively to workforce housing or to the maintenance and preservation of the housing project as a safe, decent, and sanitary workforce housing.
F. The annual service charge under subsection (b)(4)C. hereof for a workforce housing project for which a PILOT Resolution has been adopted must be increased by the Additional Amount if both of the following requirements are met:
1. Not later than 45 days after the county treasurer’s receipt of the certified notification of exemption, the County Board of Commissioners passes a resolution, by majority vote, that provides that the Additional Amount must be paid.
2. The approval of the resolution described in subparagraph (b)(4)F.1. hereof is in accordance with an ordinance or resolution adopted by the County Board of Commissioners establishing the factors to be considered when assessing whether the Additional Amount must be paid.
(5) Workforce Housing Exemption Application, Review and Approval Process.
A. The Sponsor of a workforce housing project must own the property that is the subject of the application or must be the purchaser under a purchase or option agreement or otherwise demonstrate to the City administration’s satisfaction that is has control over the property. The property that is the subject of the application must be zoned for the intended use at the time of application.
B. Prior to applying for a workforce housing exemption, the Sponsor is encouraged to meet with the Assistant City Manager or their designee, the Treasurer, the Assessor and any other person as may be designated by the Assistant City Manager and present the proposed workforce housing project, including all information requested on the form provided by the City, including but not limited to a description of the Sponsor’s organizational structure, a narrative describing the scope of the workforce housing project, including location, number and type of units, typical floor plans and exterior elevations, the targeted median income and proposed rent limits, a schedule with projected milestones, a development income and expense pro forma (including the estimated Annual Shelter Rents), and a ten-year cash flow projection.
C. When reviewing an application for a workforce housing exemption, the decision to approve or deny the request shall be guided by the City Commission’s consideration of the following factors:
1. Whether the workforce housing project will increase the number of available workforce housing units in the City.
2. Whether the workforce housing project will reduce the functional obsolescence of an existing building or housing unit(s).
3. Whether the workforce housing project is likely to encourage expansion of the City’s population.
4. Whether the location of the workforce housing project is consistent with the goals and objectives of the City’s Master Plan.
5. Whether the development or rehabilitation of the workforce housing project requires zoning variances or results in the continuation of a nonconforming use.
6. Whether the workforce housing project will include a level of amenities desired by or appropriate for the community.
7. Whether the workforce housing project incorporates green technologies or energy-efficient components.
D. Approval of an exemption for a workforce housing project requires passage of a PILOT Resolution by a majority vote of the City Commission that includes the findings with respect to the standards of subsection (b)(5)C. above.
E. If the workforce housing exemption application is approved, the city clerk will deliver to the Sponsor a certified copy of the resolution approving the application.
F. To defray the administrative cost of processing an application for a workforce housing exemption, the City Commission shall include a workforce housing application fee in its Fee, Bond, and Insurance Schedule, as set out in Ordinance 802.24.
(6) Authority Affidavit and Assessor Notification.
A. Following adoption of the PILOT Resolution, the Sponsor must submit an affidavit to the Authority in the form required by the Authority for certification by the Authority that the project is eligible for the workforce housing exemption.
B. Upon receipt of notification from the Authority that the project is eligible for a workforce housing exemption, the Sponsor or the Authority must file the certified notification of exemption with the city assessor before November 1 of the year preceding the tax year in which the exemption is to effective.
C. Not later than 5 business days after receipt of the certified notification of exemption, the assessor shall provide a copy of the certified notification of exemption to the County treasurer.
(7) Payment of PILOT.
A. No later than June 1, or such other date provided for in the PILOT Resolution, Sponsor shall submit to the city treasurer, Sponsor’s budget for Annual Shelter Rent for the current calendar year and a copy of Sponsor’s audited financial statements for the preceding calendar year, prepared in accordance with generally accepted auditing standards or, if Sponsor is not subject to an audit requirement, Sponsor’s compiled financial statements for the preceding calendar year prepared in accordance with generally accepted accounting principles and certified by Sponsor. Within 30 days of receipt of the foregoing documents, the treasurer shall issue an invoice showing the PILOT payment due for the current year, which payment shall be due no later than September 14.
B. Except as otherwise provided in this section and section 4, any payments for public services under this Ordinance shall be distributed to the governmental units levying the general property tax in the same proportion as prevailed with the general property tax in the previous calendar year. The distribution to those governmental units shall be made as if the number of mills levied for local school district operating purposes were equal to the number of mills levied for the purposes in 1993 minus the number of mills levied under the state education tax act, 1993 PA 331, MCL 211.901 to 211.906, for the year for which the distribution is calculated. The amount of payments in lieu of taxes to be distributed to a local school district for operating purposes under this subsection must not be distributed to the local school district but instead must be paid to the state treasury and credited to the state school aid fund established by section 11 of article IX of the state constitution of 1963.
C. Any PILOT payment or portion of PILOT payment remaining unpaid as of the due date shall bear interest at 1% per month, in addition to a required payment of a 3% penalty fee. The collection of past due PILOT payments shall otherwise be in accordance with the provisions of Chapter 211 of the General Property Tax Act, Act 206 of 1893, as amended; MCL 211.44 et seq.
(8) Duration and Recorded Restrictive Covenant.
A. A workforce housing project approved for an exemption by a PILOT Resolution shall be encumbered by a Restrictive Covenant recorded in the office of the register of deeds for the County.
B. The Restrictive Covenant shall acknowledge (i) that the economic feasibility of the workforce housing project depends on the approval and continuing effect of the payment in lieu of all ad valorem taxes as approved by the PILOT resolution; (ii) the City agreement to accept payment of an annual service charge in lieu of all ad valorem taxes in consideration of the Sponsor’s offer to construct or rehabilitate workforce housing; and (iii) the amount of the annual service charge to be paid for each operating year.
C. The Restrictive Covenant shall provide (a) for the reporting and monitoring of the Sponsor's compliance with the Restrictive Covenant, this Ordinance and the PILOT Resolution; (b) that the Restrictive Covenant is enforceable by City of Battle Creek and any Tenants to be benefitted at law or in equity; (c) shall provide other remedies available to the City of Battle Creek for non-compliance, including termination of the exemption and repayment of all prior years’ tax savings under the workforce housing exemption after notice and hearing; and (d) that the Restrictive Covenant cannot be modified or terminated except in a written instrument executed by the Sponsor or then current owner and the City.
(9) Severability. The provisions of this Ordinance shall be deemed to be severable, and should any provision be declared by any court of competent jurisdiction to be unconstitutional or invalid, the same shall not affect the validity of this Ordinance as a whole or provision of this Ordinance, other than the provision so declared to be unconstitutional or invalid.
(10) Inconsistent Ordinances. All ordinances or parts of ordinances inconsistent or in conflict with the provisions of this Ordinance are repealed to the extent necessary to give this ordinance full force and effect.
(Ord. 12-78. Passed 11-14-78; Ord. 17-2023. Passed 11-21-23.)